Question

. Calculating Cost of Preferred Stock: Holdup Bank has an issue of preferred stock with a $3.75 stated dividend that just sold for $87 per share. What is the bank’s cost of preferred stock?

Answer 1

Answer:

4.31%

Explanation:

Calculation for the bank’s cost of preferred stock

Using this formula

Cost of preferred stock=Dividend / Selling price of stock

Let plug in the formula

Cost of preferred stock= $ 3.75 / $ 87

Cost of preferred stock= 4.31%

Therefore the Cost of preferred stock will be 4.31%